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The Case For California Prop 90: The Death of Eminent Domain

October 22, 2006, 5am PDT

Leonard Gilroy, AICP, makes the case for why Californians should support Proposition 90, which he suggests will block eminent domain abuses and limit regulatory takings.

The government shouldn't be able to take your home or land so it can hand it over to another private party. And if the government passes a new law that substantially lowers the value of your property, it should have to compensate you for those losses.

...By requiring the economic costs associated with regulation to be valued, Proposition 90 would facilitate more efficient decision making, as policy makers would be better able to compare the costs and benefits of public action. It would also promote transparency, as the full costs of government action would become visible and explicit."

Comments

Comments

don't be misled: NO on 90

the true intent of Prop 90 is to scare state and local governments from making land use decisions of all types.

here's an excerpt from the author's full policy paper:

"Further, Proposition 90 would prevent future regulatory takings abuse by requiring governments to
compensate landowners for significant economic losses incurred due to the adoption of new
regulations. For example, if a new regulation limiting the cutting of oak trees prevents a property owner from building on his land, the government would have to compensate him for the lost value from using his land to build on."

To take this example further, even if the regulation allowed the building of 10 homes instead of say, 15 homes and a small commercial site, the landowner could sue the agency for the 5 additional units and the commercial site that were "taken".

Multiply this small example by the thousands of land use decisions across the state each year, and you get a good idea of how dangerous this legislation could be.

Interest groups from the right (chambers of commerce, Homebuilder's Assoc. of Nor Cal) and the left (environmental groups, labor) are united in opposition Prop 90.

Tyronus, I have to disagree with your assessment...

The intention behind Prop 90 is to help restore the balance between private property rights and government action, not to "scare" local governments into inaction. It's a prospective-only measure, so all laws on the books stay on the books, and it even exempts modifications to existing regulations (i.e., zoning changes related to general plan updates, etc.) so long as they don't significantly broaden the scope of application of the original regulations.

And with regard to the example you gave, I think that's highly speculative. Prop 90 gives a property owner cause for action for a "substantial economic loss," and the courts and/or the legislature will determine what that threshold loss level is.

What Prop 90 will do is provide relief to those landowners who face a regulatory wipeout, such as those landowners in the city of Brea are currently facing a massive downzoning under their proposed hillside protection ordinance. Those people bought their property paying fair market value for it based on the zoning in place at the time, so it's only fair that if government severely downzones them that it make them whole.

One landowner in Brea owns 300 acres, on which he could build about 307 homes under existing zoning. The proposed ordinance would slash that number to 15 homes. So basically he would lose 95% of the development potential of his land. Do you view that situation as being OK? It's fine for government to want to preserve that open space, but they should be willing to pay for it, and under the current state of affairs they don't have to. I don't think that's inherently unfair and immoral.

And with regard to the coalition opposing P90, the reasons for the "left" groups to fight it are obvious...they have the unfettered ability to implement their agenda by passing regulations that severely impact property owners without compensating them. Sounds like legalized theft to me. As for those on the "right," I'd counter that many of them either stand to benefit from the abuse of eminent domain, or, as in the case with the builders, are large enough to absorb the costs of regulation, so they can "pay to play" and don't want to rock the boat. It's the little guys--small landowners and businesses--who are most impacted by the current state of affairs.

And to be clear, there's a broad coalition on the pro-90 side too, with traditional "left" and "right" interests represented, so it goes both ways.

I think that a lot of planners (and I am one myself) lose sight of the fact that a lot of our work involves hidden impacts on a minority of property owners that we either don't see or disregard in the quest for the "greater good." In my years of smart growth planning, my experience was that property rights were rarely if ever considered during the planning process. The simple fact is that we do not live in a totalitarian society where government gets whatever government wants...our system was designed to protect the minority from the tyranny of the majority. But unfortunately, that's not happening today with regard to land use regulation, hence Prop 90. Far too often, planners seem to view private property rights as anathema to what they're trying to do.

I think that the big lesson to be taken from OR's Measure 37, Prop 90, etc. is that planning should better incorporate property rights into the policy framework.

Len

Prop is winning in the polls - get the word out

If this issue were only about eminent domain reform, then why couldn't its authors have kept it to that subject? The reason Prop 90 goes so far is because is has been bankrolled by New York developer Howie Rich. Mr. Rich holds strong Libertarian views, and this proposed legislation reflects those views.

The potential impact of Prop 90 is already being felt. The City of Oakland is trying to pass an inclusionary housing law prior to the election because it is afraid of what might happen if Prop 90 passes.

We agree that the courts will be forced with interpreting the full breadth of this legislation, so my example is not speculative. Regardless of where the courts rule, this will introduce significant uncertainty in an already cumbersome entitlement process, not to mention the unknown dollar cost.

What might be speculative is the Brea property owner's purchase of 300 acres. Perhaps the landowner made a business decision with the knowledge that the land could be habitat. At my company (developer) a habitat study is part of our due diligence. It is irresponsible to raise this example without knowing more facts.

Finally, the coalition against Prop 90 has been cited by many as unusally broad *and* deep. All of them recognize that this is poorly written legislation that could radically alter the state's budget and landscape.

If eminent domain reform is the real goal here, then go back to drawing board.

Tyronus, a few questions...

I'm not sure where your first question came from, because I have never said that Prop 90 was "only about eminent domain reform." I said in my reply to you quite clearly that it was about protecting private property rights. The paper I wrote covers both topics. If you're referring to the title that Planetizen gave to this page, that's their title, not mine.

On Howie Rich, all I know is that he has the right to fund petition drives, just as George Soros has the right to fund the various groups that he does that aim to achieve policy change. And let's be real...the money that is coming in to the opposition is far greater than the money coming in to the pro-side.

And I'd appreciate a retraction on your claim that my example was "irresponsible." A colleague spoke with the owner a few weeks ago for a story we were writing together, and he has been profiled several times in the Orange County Register. Leo Hayashi bought his land in Brea 30 years ago as a nest egg, when he had the full right to develop several hundred homes on it. And that's what he intended to do, at least until the push to downzone him 95+% began. I can assure you that it wasn't bought with the knowledge that the land could be habitat. It's not even habitat that the ordinance is pushing...it's open space under the guise of hillside preservation.

And you didn't answer my question, which was do you think what he's facing is OK?

Lastly, can you tell me how Prop 90 would "radically alter the...landscape"? Given that it exempts everything on the books, I find it difficult to see how it could radically alter anything.

Len

Welfare for Land Speculators

So let me get this straight. A guy bought a piece of land as an investment 30 years ago, and it turns out that the zoning rules change, and instead of being worth say $100 million, its only worth, say, $10 million. And you think the public is supposed to pay him the difference?

If you make a speculative land investment, don't you think that you should accept the risks of that investment? Rules change--that's always a risk of land development.

And by the way, I bet if he sold that 300 acres in Orange County, he's still had a pretty good return on his investment.

Peter, what would you think if that was your investment?

It's easy to toss about "welfare for land speculators," but if that was you or your family that was getting downzoned by 95%, would you just shrug your shoulders and say oh well, what government giveth it taketh away? Market uncertainty is one thing. If I invest in a stock, the market dynamics certainly don't guarantee me a steadily increasing return. But if government comes in and says we know you own $100 million in stock but we're only going to let you have $10 million of it, would you be OK with that? Yeah, we'll take $90 mil from you, but at least we're leaving you with $10 mil? Investment works when property rights are secure. That's why China is rushing to institute property rights in their system.

So that's what we're talking about here: the direct result of government intervention as opposed to market dynamics. Changing the rules of the game is a fundamentally different proposition than the vagaries of market ups-and-downs. Government's role is to provide a platform via rules & processes to support market stability, not take it away on a whim.

Protect Our Investors

I someone buys land hoping he may be able to sell it to developers in a few decades, I don't see how he can complain if it is rezoned during those decades.

This is not like taking 90% of your stock away. This person still owns 100% of the land that he bought.

The message to voters is "protect our homes." The reality is "protect high profits for investors, even if it means ravaging our neighborhoods and our countryside."

Len, would you like a developer to max out his profits by building a high-rise right next door to your house or by building a sprawl subdivision right next door to your farm? Is that the way to "protect our homes"?

Charles Siegel

Charles, a home IS an investment...

A home IS the biggest investment that most people make in their lives. I sense that you're trying to polarize the debate by separating the two. And yes, some people do choose to put their home on a big piece of land hoping to someday develop it to fund their nest egg. If I'm inferring correctly from your statements then, I guess those people are just greedy ravagers of the land?

To your next point, I'd counter that if government takes away the development potential that was there when you bought it, AND paid fair market value for it based on the zoning in place, then if you're downzoned you may still hold title to the land but you don't still own 100% of what you paid for. As I stated above, that's what the whole concept of conservation easements & PDR programs are based on...attaching a value to the development rights separate from the land itself.

Finally, your questions indicate that you don't seem to have too much trust in the last 30 years of planning in California, since high-rises next to homes and subdivisions next to farms are apparently rampant. But seriously, if a neighbor is somehow allowed under zoning to build a high-rise next door (isn't that actually desirable under NU/SG planning in established urban areas--higher density, compact urban development, right?), if that high-rise has a tangible impact on my property (i.e., reduced sunlight, etc.), then I can take them to court. And if I'm a farmer with a subdivision next door, I could see there being a variety of reactions...first, that use next door might make my property more valuable if it's zoned the same way. Second, maybe I just don't like it and wish it wasn't there. Or third, that's not my property so I can't really complain about it, can I? The latter seems like the most logical to me, but I realize that we've allowed the notion that the community should have veto power over individuals' development decisions to take hold, particularly in California.

And that idea is working out really well, isn't it? Let's vote in urban growth boundaries, vote out new development, complain to our planning commissioners/city council/etc. until they ratchet down the final densities on projects they do approve, and basically just close the gates and make development someone else's problem. Never mind where the millions more in projected state population growth are actually going to live...someone else will take care of that. And then we wonder why housing costs are in the stratosphere...no worries, we'll pass inclusionary zoning ordinances, except they really just push construction elsewhere, result in few affordable units relative to overall need, and drive up the costs of market-rate housing even higher. OK, so that's not working, so let's just pass a $2.85 billion housing bond to build new affordable housing (except it won't, because only a small fraction actually goes to new housing). And then when that doesn't work, we'll sit back and scratch our heads and wonder where it all went wrong. But if a guy wants to actually build some houses on his land, well, how horrifying...he must just be a "greedy developer."

Sorry to rant, Charles, but your post has an undertone of subtle class warfare that I disagree with. I'd imagine that you disagree with a lot of my views too, and that's OK. We can agree to disagree.

Thanks Charles.

Thanks. Until reading your comment, I wasn't aware that I was an "expert in class warfare." Boy, I guess you do learn something new every day.

To be clear, it was you, not I, that made the argument framing the issue as one of greedy, rapacious developers/investors (which comes off as "the rich who just want to get richer off the land") versus the rest of us (presumably), right? So why don't you defend it rather than going down the argumentum ad hominem route to try to simply turn the tables back around on me? Really now, do you actually want to talk about the issues or not? I'm hoping that you do, so I'll proceed on that assumption.

Your assertion that "Protect Our Homes" is misleading doesn't jive with the facts. For example, by requiring blight to be determined on a parcel-specific basis, you prevent the situations where well-maintained homes get swallowed into a larger "blighted" redevelopment area. Also, by giving people access to the courts in eminent domain actions, you give them a fighting chance to defend their homes. And, though you obviously find it objectionable, some people buy land both for their home AND for the possibility of doing something with it other than leaving it untouched, and Prop 90 would help to protect those landowners from FUTURE regulatory impacts.

By and large, the problem that we're talking about here are not the established neighborhoods that want to preserve character. As I've mentioned ad nauseum, it's the people on the urban/rural fringe who are downzoned en masse to preserve farmland and open space. It's Ventura County SOAR scenario. It's the Contra Costa scenario. It's the UGB scenario. While there may be smaller scale impacts in other spots, these are the situations where the biggest regulatory impact occurs.

And all I'm saying is that it is fair and appropriate to follow the PDR/easement model and make the impacted owners whole rather than forcing them to bear the cost of providing a public benefit. You obviously disagree and think it's OK to have a system where government pays for development rights when it has the money (through PDRs, etc.) and just steals them through regulation when it doesn't. I see theft, you see beneficial regulation. There are two worldviews colliding here...you won't convince me, and I probably won't convince you.

Len

PS - Your argument that the neighborhood groups that want to "protect character" are somehow not interested in maximizing the amount of money they get when they sell their homes is puzzling. If you've ever been to neighborhood meetings where planning and zoning issues come up, it doesn't take long before somebody mentions "property values." The two concepts--'neighborhood character" and "property values" are inextricably linked. Hence, the widespread phenomenon of exclusionary zoning which is predicated upon that concept. And that's what feeds into that cycle I described in the previous email...all of the homeowner incentives point in the direction of excluding new residents and choking off new supply. And open space regulation is a convenient vehicle for achieving that.

Socializing the Business Risk of Owning Property

You must be kidding. Class warfare? Prop 90 is the very essence of class warfare: an attack by the class of property holders with the means to sue, against the small holders and everybody else.

It is obvious, except to the Reason boys and the other running-dog think tanks, that this attacking class is merely proposing to socialize their business risk. In this, they are no different from all the other freeloading special interests who cannot compete in honest public debate, and resort to the pitiful alternative of a deceptive initiative campaign.

______________________
Stephen Lawton
Citizen - Not as Public Official

Socializing Property Rights

Is that your version of "honest public debate"? I've made my perspective pretty clear in the thread above, and the other posters and I have legitimate disagreements on the merits and concepts involved. Given your intimate familiarity with the issues involved, I'd expect that you could add more to the discussion than this. In fact, I'd welcome that.

Just curious, do you see the people whose homes & businesses have been bulldozed (or threatened with ED and coerced to sell) for dubious redevelopment projects, or the long-time landowner who loses development rights through regulation, as part of the "attacking class"?

Knife Fight

You bet this is my version of honest public debate. Howie Rich, Reason and the PPR movement has started a knife fight; you should not be offended at the flash of a blade.

And yes, let us be clear about the attacking class. Prop90 is an attempt to assert rights not now extant. Your right to swing your arm stops at my nose.

California has a strong legal and regulatory framework developed over many years. Many dedicated public servants and private advocates have achieved a sophisticated balance between development rights and all other rights.

The PPR movement has no regard for this work of generations. It seeks merely to demolish this important institutional legacy, replacing it with nothing.

Further, it is my opinion that on many points, your arguments are simply not legitimate. They are framed to deny the existence of other valid competing rights. These include the rights of local communities, through their elected officials, to plan for orderly and predictable development.

Indeed, property owners are silently protected every time a local agency deliberately considers land-use regulation. Thus, the premises upon which the PPR movement operates are easily refuted, so it does not matter how long or eagerly the subsequent arguments are made.

I will stand by my words, even if California voters fall for the trick and Prop90 is adopted.

Whups... gotta go fight this thing. Don't know about you, but I plan to win.

Consider the source, Dano.

Push polls, which this one obviously was when you read the description in the paper, will tell you anything you want to hear, Dano. You know that. It's Politics 101. And given that it was bought and paid for by Defenders of Wildlife, I'd hardly expect anything else. You know as well as I do that this poll was aimed at one thing...an October surprise to feed the ballot measure opponents.

Please tell me how I misstate the argument, Dano. Just because you don't like it doesn't invalidate it. What we're talking about is a philosophical issue and is inherently subjective. You're a communitarian, I'm an individualist. You think it's OK to trample on private property owners to achieve public benefits, I don't. Your position is no more or less valid than mine...that's your preference, and I have mine.

If you can't admit that there are two legitimate viewpoints, then there's no point in talking.

I'm considering the robustness of the methodology, Leonard.

Push polls, which this one obviously was...will tell you anything you want to hear, Dano

Sweet! Even though, Leonard, the sample size is small and the questions detailed, it's obviously a push poll instead of a standard poll to test a political question.

The English language is so...flexible, isn't it?

Redefinitions aside, I hope you will let me know when Reason conducts their own non-push poll of OR voters to survey the landscape. Share with us, please, how that works out. I promise not to call it a push poll if I don't like the results.

Two choices: bang your data or bang the table. You have no data.

You think it's OK to trample on private property owners to achieve public benefits, I don't.

No I don't.

Nowhere have I even come close to asserting that.

All my arguments on this thread and the other one have been about the implications to the citizenry if these measures are enacted.

I haven't discussed the equity issue at all. Perhaps you missed it in your fervent typing activities.

What I have discussed wrt private property rights, contrasted with the assertions of the rights of a tiny minority who want to impose their ideology on the rest of society is encapsulated here:

In reality, there are costs to a few people. Everyone knows that. The issue in WA is that, apparently, the current remedy is insufficient so there’s a backlash. The [PPR] initiative, however, is beyond the scope of the scale of the required remedy...it isn't hard to see that the amount of redress isn't $Bs to the few rural landowners bearing the burden of a UGB.

and further down that reply I stated:

These PPR initiatives want to make everyone pay for a few landowner's dimunition. I'm pretty sure the majority in WA sees thru this scheme.

It's true that we don't address the few landowners who are outside the UGB but want to develop. We _should_ compensate a few landowner's lost value, as they've likely made plans.

As to your question about misstating arguments, let me quote the statement in question:

it is my opinion that on many points, your arguments are simply not legitimate. They are framed to deny the existence of other valid competing rights.

Again, I repeat, it is not your position that is illegitimate, it is your argumentation; I have taken issue with it myself and I point it out again above in this comment. SRL asserts there is a deceptive campaign. Your framing of the issue is the problem here not that property rights are illegitimate.

Best,

D

Thanks Dano.

First, my apologies, as I had forgotten your previous statements on the issue...you do seem to recognize that there is indeed a problem: "In reality, there are costs to a few people. Everyone knows that." It seems that while we agree that there is a problem, you find the proposed remedy to be a disproportionate response. That's fine; while I disagree with it, that's a valid viewpoint to hold.

And while I do disagree with your argumentation, I won't go so far as to call it "illegitimate." You're talking data; I'm talking principle. We obviously frame the issue differently. Sounds like a good basis for an agreeable disagreement.

However, since you are focused on data, then I have one last request of you. Please present the data that supports this statement: it isn't hard to see that the amount of redress isn't $Bs to the few rural landowners bearing the burden of a UGB. If it's not hard to see, then I'd love to see it. Clearly that hasn't been the case in Oregon, where almost all of the claims have been filed from owners outside the UGBs.

Unrobust methodology. Check that: no methodology.

Please present the data that supports this statement: it isn't hard to see that the amount of redress isn't $Bs to the few rural landowners bearing the burden of a UGB.

Thank you Leonard. I note lots of interesting ways that you keep on message.

The trouble with claimant's valuations is encapsulated here:

But the measure provides neither a method for determining the extent of those losses nor a method for financing them. In many cases, the losses estimated by claimants are based on scarcity value that was actually created by the development of the land use system. But with no guidelines for determining the value of claims and no funds for paying them, city councils, county commissions, and state agencies making decisions on Measure 37 claims throughout the state are left with no option but to waive regulations...

That is: jurisdictions don't have the money to do the analysis to check the flimflam.

Nor do the I-933 proponents have the analysis - they have no idea, they just take opponents' analysis of WA's expected claims (estimated from OR) and say that's the amount of redress owed. Seriously, that's what they did. Proponents turned around and used estimates to claim that's the amount owed in redress.

See, that's their $Bs claim. They get to back it up, not me. They made it, they get to back their claim. Basic rule.

I've asked them to provide evidence or analysis for their assertion and they can't. It's their ludicrous assertion, based on nothing. That's why it's not hard to see.

Have you seen these people speak? They couldn't factor their way out of a paper bag. And since no real estate folks are backing them, they get no analysis. So they make it up.

Best,

D

Sorry to hijack Steve's thread.

Bad analogy

As Charles pointed out, your stock analogy is not a valid one. The government has not taken away anyone's land here; it has only imposed new land use regulations which had the incidental effect of reducing the potential value of a land investor's speculative investment. I don't think the local government is concerned with the profits of land speculators or the potential values of undeveloped land, nor should it be. Its concern is the proper regulation of land uses to promote the health, prosperity, and quality of life of the community.

The risk of changes in governmental regulation come hand in hand with land investment. It is unreasonable for an investor to cry foul when land use regulations change or to demand that the regulations be changed in order to increase the value of their property. I think we should only be concerned if the regulations have deprived the property owner of any economic use of the land or have created an undue economic hardship. I don't know the particulars of this case, but it sounds like this investor still has a valuable piece of property with feasible economic uses.

Proposition 90

For a foundation which apparently places high value on the use of the word "reason" in its eponymous name, I was expecting a more balanced and reasoned approach to the analysis employed in what reads to me as a one-sided review of this ballot measure. Since there are polarized views on the subject matter and most voters are probably, as usual, somewhere in the middle of this debate, the article may have been more effective had it at least conceded some defects in the measure. Like virtually every important public policy in California, reduction to a black and white view of the world is naive and unconvincing; there are probably pluses and minuses in the language, and a few unknowns. While our pending action on November 7 is restricted to either an up or down vote, the discussion preceding it should reflect an honest appraisal. Is there nothing at all the author foresees as potentially troubling? If not, this would be the first perfect piece of legislation to ever visit a polling place. Even the U S Constitution has had its Amendments.

Reply to Zonetizen

I'm sorry that you didn't find what you were looking for in my analysis, but I do stand by it. Sure there are unknowns in Prop 90, as it's a constitutional amendment, not "legislation" as you put it. As you know, constitutional amendments are not designed or intended to provide implementation detail or point-by-point specifics...rather, they outline the fundamental legal principles, and it's up to the courts to interpret it and the legislature to provide an implementation program (as Prop 90 expressly gives the legislature the authority to do). Some may see that as a "defect," but I don't see it that way...that's what the courts and legislature are there to do.

What really troubles me most are two things. First, the current state of affairs in planning, which I describe in my reply to Tyronus below. Second, the hysteria being promoted by the opponents of Prop 90 who are using all manner of distortion, deception, and specious and speculative claims to frighten voters. For instance, I read the head of the Coastal Commission's op-ed in a paper last week claiming that under Prop 90, "well-established coastal protections could be eliminated overnight." This is a blatant falsehood, as Prop 90 would exempt any regulation currently on the books, including everything done by the CCC under the Coastal Act.

Anyway, I do appreciate your thoughts on my paper. I live in the policy world, so critique and debate are welcome.

Givings should be acceptable too, under this logic.

And if the government passes a new law that substantially lowers the value of your property, it should have to compensate you for those losses.

I think that the best way to make this...er..."fair" is to include the converse too: if the government passes a new law that substantially raises the value of your property, you should have to compensate the government for your gains as much as the government must compensate others for their losses.

That's the middle ground under this particular reasoning, not this far-right pendulum swing that stifles land-use law altogether to redress the grievances of a few.

Because, yes, land use regulations create more winners than losers, yet the minority losers want to stop everything for everybody because they can't develop the way they want. Minority rights are great, but really now.

Best,

D

Dano, government already captures "givings"...

Government already captures revenue from improvements via property taxes and, if economic growth occurs, through sales and income taxes.

But, the issue is more fundamental than that. Government doesn't create value. The market does. Government policy can enable or hinder the market to capture new value by using resources more efficiently. Restricting uses has a clear negative impact, but enabling the market to work may or may not create value. So, we can be certain that government regulation will reduce value, but we can't make the same conclusion for "givings" or "betterment" (as they say in England).

This issue has been a big one for decades, and there has been a vigorous debate over it in Europe and England. Everytime "betterment" issues have been approached in England, the task forces/commissions essentially wring their hands and give up, saying its too difficult of a problem for government to handle.

The issue of compensation is a lot more clear cut. The purpose of regulation is to restrict, and the consequences are much more tangible and transparent.

Lastly, Prop 90 would hardly stifle land use law. It's a purely prospective measure, unlike Measure 37 and I-933. So all the laws and regulations in effect on November 7th would be in effect on November 8th. Further, P90 exempts reasonable modifications to existing laws and regs, so planning will hardly be stifled under the measure. In fact, many property rights advocates complain that Prop 90 is too compromising in that respect, as it wouldn't offer relief to landowners who have suffered losses under California's aggressive local land use laws. Believe me, there's no lack of planning in California, and none of it would be touched under Prop 90.

Len

Government most certainly does create value

I strongly disagree with this statement:
"Government doesn't create value. The market does."
Government builds roads, sewers, utility lines, parks, schools, etc. Government provides essential services. All of these things are necessary for a private development to have value.

Moreover, government regulation such as zoning regulations create value; regulations protect landowners from negative or damaging impacts from land uses on a neighbor's property, or protect common goods like the quality of the environment. Zoning regulations were first instituted to protect *property values*.

Its disingenuous of the promoters of Prop 90 to use the general public anger over the Kelo case to try to pass this fundamental change in the government's ability to regulate land use. Why can't there be two measures -- one for changes to eminent domain law and a second for changes to land use regulation? Because the supporters know that the only way to get their fringe viewpoints on the latter issue passed as law is to bundle them as a single measure.

"Facilitating" value is different from "creating" value

A couple of points. First of all, in California private developers are increasingly providing the resources for the infrastructure you mention, either through high impact fees or direct provision of these public works. So the idea that this is government's role alone is false.

And again, the government doesn't create the value -- it creates the opportunity for gains in value by determining the rules and allocation of uses. The resulting value is going to depend on what the market does with property. And yes, zoning is often defended with regard to its role in protecting property values (though we all know the equity distribution under current zoning is way out of whack -- zoning is used more often to exclude and limit supply of new, competing housing). But "protecting" values is a much different concept than "creating" the value in the first place.

And I disagree with your last statement. It's hardly a fringe viewpoint. As terrible as the Supreme Court has been on this issue, there is still a well-established body of jurisprudence that validates the concept of a regulatory taking akin to a condemnation. In fact, the whole notion behind the concept of regulatory takings is that it is more appropriately viewed as an exercise of the power of eminent domain. In other words, regulations are passed to create public goods, but the affected landowners are not compensated for the loss of use of their property. So I'd argue that there's a certain logic to bundling the two issues, because they're really two sides of the same coin.

Government Does Create Value

How can anyone claim that government does not create value, only the market creates value?

If the government builds a dam or powerplant to generate electricity, doesn't it create value like a private utility that builds a powerplant?

If the government builds housing, doesn't it create value like a private developer who builds housing?

If the government provides health care for veterans in public hospitals, doesn't it create value like a private hospital that provides health care?

You can argue that government does not do these things as efficiently as the market (and I would agree that this is generally true). But you have moved from the realm of "reason" to the realm of extreme dogmatism when you say that government enterprises do not create value at all.

Charles Siegel

Charles, don't be thrown off...

Don't be thrown off by my admittedly terse statement. I did not and am not trying to say that "government enterprises do not create value at all." I may be a libertarian, but I'm not an anarchist! And my statement was aimed at land markets, not health care or energy.

I thought that I had explained my point, but let me try it another way. Government sets the rules of the game for the market to then follow. That's the way development works. When you pay your property taxes, your property is assessed based on the sum value of the land and what's built on it. Two otherwise equally sized, located, and zoned properties will be valued differently depending on what's built on them (or not built on them). That's what I'm getting at. Government sets the underlying rules, but the actual development is market-driven. The owner's decision on what ultimately goes on their property goes a long way towards determining value.

Does government policy (i.e. zoning) influence value? Sure. In most of the interior of the country, housing prices are pretty close to the costs of construction. But on the coasts, we've seen that government--through regulation--can certainly create market scarcity and hence influence the value of the underlying land. Demand alone doesn't explain the massive escalation in California housing prices...even the affordable housing advocates in California understand that the supply problem is a real issue. But again, we're talking about a scarcity/rationing effect, which is a separate matter than the provision of infrastructure.

This could just be a semantic issue...to me "create" has a different meaning than "facilitate" or "influence." But please don't misinterpret my statement to mean that I somehow think government adds no value to society. I don't believe that and wouldn't make that assertion.

Len

I Agree About the Scarcity Effect In CA

I agree that downzoning has created a scarcity of housing and driven up prices in California.

Like most people who follow planning issues, I think the way to deal with this problem is by upzoning within existing cities to allow more transit oriented development and downzoning to protect agricultural land.

Prop 90 would make it impossible to take this environmentally sound approach to solving the problem.

Charles Siegel

We agree on scarcity. disagree on remedy...

I'm glad we've found a point of agreement. However, we disagree that smart growth is the remedy. And I say this as someone who for several years promoted smart growth and did my best to implement it. But I ultimately came to the realization that smart growth has some major blind spots. And while this isn't the forum for a long elaboration on it, I'll make a few quick points.

Like it or not (and most planners don't), you can pour billions into light rail and transit, and you're not going to break people's love affair with automobility. Even in Portland, after tens of hundreds of millions in transit spending and subsidized TOD, the transit share of total travel is 1%. And by completely disinvesting in road capacity, they've basically created artificial gridlock that is choking the regional economy. Further, you may want people to live in high-density urban environments, but the reality is 80% of the population still want a suburban home with a yard, which smart growth planning tends to want to regulate away. And there's the effects of smart growth on housing affordability that inevitably result when you get the open space downzoning half of it accomplished, but the NIMBY reaction against higher-density development in existing cities often prevents that component from materializing. In short, it's easy to get the open space part, but forcing higher densities on city residents is much more difficult and often falls apart--hence the supply constraint. Ventura County is a perfect example of where this is happening right now...we did two studies detailing the situation a couple of years ago.

Look, I'm an urbanist, I live near a downtown, and I hate sitting in traffic just like the next guy. And I share the goal of smart growthers and new urbanists to remove the regulatory obstacles under traditional, Euclidian zoning that prevent the market from meeting the consumer demand for mixed use, higher density development. But where I differ is that I'd like to see the market deregulated so that it can meet the full array of consumer demands, not just a select niche.

One last question for you. What do you see as the value in protecting agricultural land, and what happens when a farmer ceases to want to be in that industry but is locked into it via regulation? I ask the latter because Oregon obviously saw value in protecting a huge amount of land for agriculture, but today the agricultural share of the state's economy is on the order of 5%. So they've basically locked a ton of land into a small sector of the economy, which seems to me to prevent an adaptation to changing economic conditions, such as increasing agricultural productivity (i.e., more food produced on less land) and the penetration of global agricultural products to domestic markets (as any walk through the produce section of your grocery store will make clear).

You Can't Eat Money

Let me add that it is important to protect agricultural land generally, not just the extraordinarily high quality land in the Central Valley.

Agriculture obviously require more land than other industries. We can't judge it by comparing the number of dollars produced per acre with other industries, because we can't eat money.

Agricultural land will become even more important in the coming century, because the world's population is projected to grow by 50% in the next 50 years, because there is and will continue to be growing demand for food from rapidly growing economies such as China, and because we will need to use biofuels as a partial substitute for fossil fuels.

We should be responsible stewards of the agricultural land we have. Prop 90 would make that impossible: it would make us sacrifice the well-being of our children's and grandchildren's generations to maximize the profits of this generation of land-owners.

If ag land is that valuable, then why not pay for it?

Let me add that it is important to protect agricultural land generally, not just the extraordinarily high quality land in the Central Valley.

Agriculture obviously require more land than other industries. We can't judge it by comparing the number of dollars produced per acre with other industries, because we can't eat money.

This doesn't answer my question, and I never compared ag to other industries w/regard to output. I asked what was the point of locking up land in agriculture when the trends are clearly shifting towards more food produced on less land and increased global competition in the ag market. Had people fifty years ago tried to protect all the farmland and scare people into thinking there wouldn't be enough food to feed 300 million people, they would have been completely wrong and we'd probably have even higher ag subsidies than we do now.

And how exactly would Prop 90 make agricultural stewardship impossible? Does it force farmers to sell their land? No. Does it change any agricultural zoning on the books? No.

Or are you really just suggesting a precautionary principle approach--that there's a theoretical possibility that we might need farmland one day so we'd better lock it all down now just in case? If this is your driving concept, then why not acknowledge the value of that future farmland and simply pay the farmers who are forced into that use by future regulations for their development rights?

Len

regulatory takings

You said: "there is still a well-established body of jurisprudence that validates the concept of a regulatory taking akin to a condemnation." True, it is considered a taking when regulation deprives a landowner of substantially all economic use of his/her property. It would be a radical change to the meaning of a "regulatory taking" for compensation to be required for *any* reduction in property value caused by a regulation. There is no legal precedent government paying property owners every time it changes zoning rules or environmental regulations.

We don't require government to compensate business owners every time we pass a new law affecting business. Do you think we should have to pay Wal-mart every time we raise the minimum wage, pay car companies every time we raise mileage requirements, or pay utility companies every time we raise clean air standards?

On my first point, that government construction of infrastructure creates value: the number of cases in which a developer is building off-site infrastructure like roads or schools is exceedingly small. I'm quite sure that developer contributions for offsite infrastructure costs through things like impact fees are a very small percentage of the annual capital costs by California governments on parks, roads, sewer plants, water supply, etc. I would venture to say that there are probably even more cases where government is not only absorbing those costs but is also contributing to developers' on-site costs through tax-increment financing or property tax benefits.

I don't see how you can argue that government only "creates the opportunity for gains in value." If the government builds a highway or a park next to my land, and my property value goes up, I think it's pretty clear that the government action has created value.

Peter, a response

We obviously see the issue differently. What I think is radical is that we're at the point where government can regulate away 95% of the use of someone's property (when they paid fair market value for 100%) and that's somehow OK. If government wants to take 10% of your front yard through eminent domain to widen a road, you get paid for that percentage that they take. Why shouldn't it be the same with regulation?

And there is precedent for compensation. One example that comes to mind is WA's Forests & Fish law, which has a program under which small commercial foresters can be paid a portion of the value of streamside timber that they leave untouched. Another obvious example are conservation easements/PDR programs, under which a land trust or government agency can purchase the development rights to a property but leave the underlying title in the landowners' hands. What is that other than compensating someone for the market value/development potential "lost" by entering into the agreement?

The big difference is that those programs are voluntary, but with regulation the landowner has no choice in the matter. So in essence, I'd like to see the essential PDR concept--compensating landowners when removing development potential--expanded to the realm of regulation. If the government is downzoning you for open space or habitat, then why not compensate the landowner, just as the Nature Conservancy and other land trusts already do in the private sector. Then you're at least spreading the cost burden to the public as a whole, who ostensibly benefits from the preservation of open space, rather than forcing the cost burden on a minority of landowners.

On infrastructure, we might actually agree more than we disagree. I'd like to see a shift towards marginal-cost pricing for infrastructure (i.e., developer pays) to minimize the potential for cross-subsidization. In a perfect world, this would help insure that development pays its own way. Impact fees are a crude mechanism for capturing those impacts and have a strong potential to go the other way (i.e., new residents subsidizing existing ones). And I tend to think that TIFs and selective property tax benefits disproportionately benefit developers and not the community as a whole.

Lastly, what I was talking about the direct regulation of a parcel of property, not government actions such as building roads and parks next to you.

Len

Another bad analogy..

I think we will just have to agree to disagree, but I will respond to last posting. You made this argument: "If government wants to take 10% of your front yard through eminent domain to widen a road, you get paid for that percentage that they take. Why shouldn't it be the same with regulation?"

Taking the title to piece of property is different than regulating the use of that property. In the latter case, you still have the exclusive right to use the property, to improve the property, or to sell or rent the property.

It is absolutely not accurate to characterize downzoning as the seizure of private land for "open space or habitat". Land use regulations may prevent you from building on a portion or your property, but you still own that property exclusively. You have the exclusive right to use or rent or sell the property. And you still have the right to put buildings or improvements on other portions of your land. All private land (or at least all urban land) is regulated in some way, whether we're talking about midtown Manhattan or semi-rural Orange County.

As I suggested before, a better analogy to downzoning would be business regulations. When the minimum wage laws are raised, we don't think of that as seizing Wal-mart's property. It's just a change in the rules they have to follow in running their business, albeit one that impacts their profits and the value of their business. The same applies to land regulation.

It's not a bad analogy

1) You said, "you still have the exclusive right to use the property, to improve the property, or to sell or rent the property." Yes, you retain title to the land. Yes, you retain the rights to sell or rent property. However, you do NOT retain the same rights you had to use or improve property that you had when you bought it and for which you paid fair market value for.

2) Please tell me how it's not accurate to characterize downzoning or land use restrictions as the de facto provision of open space. That's the whole concept that Oregon's system was predicated upon (only 4% of the state is zoned for urban development, with the other 96% either gov't owned or zoned for exclusive farm or forest use). That's what rural, large lot zoning is (see Contra Costa County's ballot measure that would downzone half the county). That's what Ventura County did under it's SOAR measures. That's what the critical area buffers in Washington state do. They all limit development to "preserve rural character" (i.e. prevent development) or preserve habitat.

And the intention there is fine. I have no quibble with wanting to preserve open space or habitat, all I'm asking is that we do the same thing with regulation that we do with PDR programs, conservation easements, or the land trust approach -- pay the landowners for their development rights instead of using regulation to take them. That doesn't seem like a radical concept to me, but again, I understand that others see it differently.

Len

one last reply..

1) That's right, downzoning means you no longer have the right to improve your property as you did when you bought it. But generally, changes in land use restriction don't effect the current improvements or use of the property; e.g. if you have a house on your land, you can continue to have the house even if it doesn't comply with the new zoning. The new zoning must permit an economic use of your property. And there's always the option of seeking an economic hardship variance or a change in zoning.
I don't see land use regulation as an injustice. Changes in laws and government regulation are a risk in all business. If you buy property for real estate development, your price should account for risks like changes in zoning. And if you overpaid, you shouldn't expect the public to bail you out by giving you an exception to the rules.

2) When you say rural land use restrictions create "de facto provision of open space," it sounds to me like don't understand or appreciate why many of these restrictions are in place. These laws are there, for instance, to protect the quality of waterways and the water supply, to prevent pollution and environmental contamination, to separate residential areas from working farmland, to create areas for intensive uses like mineral exploitation or logging, etc. These laws prevent negative impacts from development on private property from affecting economic activities on neighboring land, or from impacting the public's water and air quality and environmental resources. The purpose of these laws is not to turn a private landowner's property into public open space, nor do they (as I explained above).

I would agree with your contention that some land use restrictions have been put in place primarily to keep the "rural character" of primarily residential areas. And what's the problem with that? Some residentially zoned land permits dense development, some land permits moderate density, and other land permits low density. In any case, if you own residential land you can build houses on it at the density permitted by law. How is that appropriation of private property? Is it stealing private property if the law allows one house per five acres, but legitimate for the law to allow one-acre lots? I don't see how you can make a distinction.

Dano, Prop 90 doesn't cover ALL dimunition in value...

Let's talk about what is actually on the table. Prop 90 specifically states "substantial economic loss," and the definition of "substantial" will certainly be an early focus of court interpretation and likely legislative action to define and/or create an implementation mechanism. But given the political and judicial climate in California, I think that it's highly unlikely that they would interpret "substantial" to mean anything >0%. I'd probably argue for a lower % threshold than you would, but realistically the courts/legislature will err on your side rather than mine.

But if it ratchets that threshold down significantly from the current legal "standard" (i.e., almost a total wipeout), then it would be a better situation than currently exists.

And BTW, are you actually proposing increasing property taxes? You know as well as I do that higher taxes penalize investment and reduce the overall amount. Is that what you want to see in areas that are upzoned? I thought you were interested in promoting higher density development, not placing another hurdle in front of it.

Inadequate Answer On Diminution of Value

Come on, Len. You know as well as I do that Dano was making this point:

If a regulation (eg, downzoning) creates a "substantial decrease in value," then the government has to compensate the landowner for 100% of the decrease.

If a regulation (eg, upzoning) creates a "substantial increase in value," then the government does not take 100% of this increase in taxes, just part of it.

This has nothing to do with the threshold at which a change in value becomes significant.

It has to do with the obvious imbalance in the way that regulatory takings and regulatory givings are treated.

Dano said that your point about taxes taking the increase in value does not answer his point about fair treatment of takings and givings. Instead of responding to what he said, you have thrown out a red herring about the definition of significant.

I disagree Charles...

That's hardly a red herring, and it has a lot to do with the threshold at which a change in value becomes significant. Take a look at the state Legislative Analyst's report on Prop 90, which makes the same point on this subject that I am. If the definition of "substantial" economic losses is set at, say, a 30% threshold (i.e., no claim if the loss is less than 30%), then there would be a higher potential for claims than if the definition is set at, for example, 50%.

The larger point I was trying to make w/Dano is that landowners would not have to be compensated for 100% of ANY decrease. If that was the point, then it would have been worded "economic losses," not "substantial economic losses." Prop 90 is fundamentally different from Measure 37 in that respect. Again, I'm not a lawyer, but the choice of wording seems pretty clear to me about the intention.

Would it have been more clear to specify in the initiative what that threshold level was? Of course, but as I mentioned earlier this is a constitutional, not a statutory, amendment, so it lays out the legal principle and gives the legislature an open door to step in with an implementation program that specifies what "substantial" means and the process by which claims are filed and by which government and landowners come to a reasonable agreement on what the difference in value really is.

And again, I do not agree with Dano and yourself that regulatory "givings" should be given the same treatment as regulatory takings, for the reasons I laid out at the top of the thread. I don't view them as equal concepts. I respect your difference of opinion on the subject, and we can agree to disagree.

Givings And Takings

This measure does not treat regulatory givings in the same way it treats regulatory takings.

I would like to see residential downzoning in areas threatened by sprawl and residential upzoning near transit, with the same total number of units allowed after the rezoning.

If this measure passes, this sort of rezoning would be impossible, since government would have to pay to compensate the owners of the land that is downzoned but would not be paid by the owners of the land that is upzoned.

The measure clearly makes us account for regulatory takings but not for givings.

perverse consequences?

As I understand (or perhaps misunderstand) Prop. 90, it leaves existing land use regulations in place but bars new regulations.

It seems to me that this sort of rule, although well-intentioned, could lead to some bizarre consequences.

Existing regulations make infill development very difficult- so Prop. 90 would do nothing to address that harmful aspect of the status quo.

Yet rural areas (which now are less regulated) would be free to sprawl. Urban property owners would be hit with a double whammy: their property rights would remain highly limited, yet unregulated sprawl might continue.
At best, California cities would be even more sprawling, with all the negative social and environmental consequences that brings. At worst, California cities could turn into a Buffalo, where suburban sprawl has dragged down intown neighborhoods and intown property values.